National productivity and competitive strategies for
the new millennium
Keywords
Competitive strategy,
Globalization, Productivity,
Technological change
Abstract
Globalization and national
competitiveness are popular issues
in our economic policy debates.
This paper seeks to clarify these
pressing issues facing government,
private sector and trade unions and
focuses on alternative productivity
and competitive strategies and
benchmarking for competitiveness.
It examines approaches to national
competitiveness during
globalization, the factors affecting
the competitiveness policy
framework and recommends a
holistic national approach for
competitiveness and higher
productivity under globalization.
This approach is to be based,
among others, on an understanding
of the nature of technological
change in manufacturing
enterprises so far. The pace at
which enterprises acquire
technological and other
manufacturing capabilities is to be
reflected in shifts in comparative
advantage at the country level.
Thus, national competitiveness can
be proxied by manufactured export
performance relative to
competitors. For the economy to be
more competitive and productive
there are strong needs for rapid
manufactured export growth,
combined with sustained
technological upgrading and
diversification.
Integrated Manufacturing
Systems
13/6 [2002] 408±414
# MCB UP Limited
[ISSN 0957-6061]
[DOI 10.1108/09576060210436650]
[ 408 ]
P. Shurchuluu
National Productivity and Development Center, Ulaanbaatar, Mongolia
Introduction
Globalization has accelerated since the mid-
1980s. It involves a complex process of
international integration with revolutionary
implications for developed and developing
countries alike. It brings together
international trade flows with direct foreign
investment and portfolio capital flows. The
speed and persuasiveness of recent
globalization have been particularly striking.
In this line we highlight five major areas.
The first is the end of socialism ± and the one
third of humanity that is coming into the
market system. This is changing the balance
of skills and economic geography. The
socialist world had a very good educational
system ± there are now lots of skilled workers
(especially engineers and scientists) coming
into, the world markets. There are whole
areas of the world opening up to affect
competition drastically in some areas.
The second change is the shift from natural
resource to brainpower industries.
Brainpower industries have no natural
home: they can be wherever the brainpower
is or is attracted. What we do (such as
shopping on the Internet) is now often
determined as much by sociology as by
technology. Technology makes things
possible, but we may choose not to use it.
However, the sociology will change, as the
new, technically literate generation comes of
age and not power.
Third is demography ± the ageing and the
moving of the population. In the last ten
years about 180 million people have moved
from their native countries (sometimes
illegally) to find work.
Fourth is communications technology,
which has made possible global economies ±
which now dominate. A part for a motor car
can be made in Germany (from materials
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from Mongolia), shipped to Brazil, assembled
into a car that is sold in Chile.
All of these impact on productivity
(especially as represented by knowledge) and
on many of the surrounding issues.
Productivity intellectual copyright in the
global marketplace is difficult ± yet it is the
key in the brainpower industry.
We are in a period of punctuated
equilibrium. The world has been relatively
stable and predictable for 50 years.
Developing nations have to up-skill and raise
their productivity very quickly to ``play in
the game''. World capital markets can make
and break companies and countries:
government has a reducing influence. To
compete in this world, there is only one real
source of competitive advantage ± the
knowledge and skills of the workforce.
Government do have an important role ±
in providing infrastructure (such as
telecommunications). Private companies will
not build in advance of a market ± but they
will invest to follow a market. The Internet
can now be taken over by the private sector ±
a market exists but its development had to be
funded by governments.
Governments also create education
systems. Knowledge-based industries need
educated employees. Of all biotechnology
graduates 95 per cent have graduated in the
USA ± and the USA dominates the
biotechnology industry. Yet, as the
population ages, how do we persuade them to
invest in a long-term future?
So, we all need to ask: How do we change
ourselves and our organizations without
waiting for a crisis? This is the key to
productivity ± managing change on an
ongoing basis.
How do we recognize the changes that have
to be made? By recognizing the value chain
opportunities to exploit them. The airlines, for
example, want electronic ticketing, because
they want to take profit from the travel agents.
How we do become a world player? By
benchmarking with the best in the world.
P. Shurchuluu
National productivity and
competitive strategies for the
new millennium
Integrated Manufacturing
Systems
13/6 [2002] 408±414
Figure 1
World competitiveness formula
And by having a global vision (even if we
only operate in the country and one market).
How do we know that we have the
knowledge and skills to achieve a
breakthrough in the technology markets? We
might not know but, if we get it wrong, it will
be too late.
Competitiveness
The world today is characterized by constant
and rapid changes. It is also an increasingly
global world, with high volumes of goods,
services and information flowing between
countries. The result is greater competition
among countries, regions, cities, industries
and companies.
Competitiveness is desired only because it
holds the key to sustain economic prosperity,
jobs and a higher standard of living. The
Organization for Economic Cooperation and
Development (OECD) defines national
competitiveness as ``the degree to which
a country can, under free and fair market
conditions, produce goods and services
which meet the rest of the international
markets, while simultaneously maintaining
and expanding the real incomes of its people
over the long term.''
The world competitiveness formula that
forms the basis for assessing countries in the
world competitiveness report is shown in
Figure 1.
Competitiveness of an economy depends on
the competitiveness of the firms within its
boundaries. However, a national economy's
competitiveness is something more than a
simple expression of the collective or
``average'' competitiveness of its firms. Firms
do not operate in a vacuum. While successful
management practices obviously contribute
to firms' competitiveness, the characteristics
of the national environment in which the
firms operate are no less important. Some
economists have adopted the notion of
``structural competitiveness'' to express
this fact.
Competitiveness is relative. The real test of
competitiveness takes place in international
markets. Hence the term ``international
competitiveness'' is frequently used. It
determines the ability of a country or a
company to, proportionally, generate more
wealth than its competitors in world markets
by creating an environment which favors
sustained value added creation.
Productivity: the key to
competitiveness
The world competitiveness formula provides
a framework for countries and companies to
focus their attention on the factors that will
make a difference to their competitiveness.
The first half of the world competitiveness
formula comprises competitive assets.
Traditionally, competitiveness was viewed as
being dependent on the possession of
abundant natural resources and labour. This
was rooted in the now practically defunct
theory of factor-comparative advantage,
which explained the growth of the Western
developed countries from the 1800s to the
mid-1900s. However, these views of
competitiveness have not been able to
explain the more recent economic
performance of many countries.
During the past four decades, Japan, Hong
Kong, Singapore and Taiwan achieved
impressive economic growth of more than
6 per cent a year despite their dearth of
commercially exploitable resources.
Switzerland and Sweden have the highest
nominal per capita incomes among the
OECD countries, despite their small and
expensive pool of labour. The vital link
between the possession of natural assets and
competitiveness is the transformation of the
former into competitive assets. This is the
task of achieving higher productivity by
optimizing the use of the assets or resources.
The second half of the world
competitiveness formula comprises
competitive processes. From the business
point of view, effective management of
processes, including quality, speed,
customization of products and service is of
vital importance to competitiveness. The
concept of business reengineering, coined by
Michael Hammer and now widely embraced
by companies, is based on the idea of
radically redesigning or transforming
processes so as to achieve dramatic
improvement in performance. Essentially,
this means achieving high productivity from
a company's business processes. In short,
[ 409 ]
P. Shurchuluu
National productivity and
competitive strategies for the
new millennium
Integrated Manufacturing
Systems
13/6 [2002] 408±414
[ 410 ]
from the viewpoint of both assets and
processes, high productivity is vital for
competitiveness.
A competitiveness framework
The ability to combine cost-efficiency with
continuous productivity improvements is
essential for competitiveness. This ability
stems from the dynamic interplay between
capabilities and product markets. The
capabilities define the best that can be
achieved (or supply potential), while the
product markets operate within an
institutional framework, institutions act to
alter capabilities, and product markets
modify behavior by changing attitudes and
expectations and determine the rules of the
game. In other words, the institutional
framework provides the necessary climate
for competitiveness.
Capabilities include assets such as
manpower, technology, physical
infrastructure and financial capital, as well
as the processes that enable the
transformation of assets into products and
services. Quality processes enable the
achievement of world-class standards, while
innovation enables breaking of frontiers and
means quantum leaps rather than
incremental gains. With shorter product
life cycles, speed has become another
critical component of the transformation
process. Competitive assets and processes
have to be complemented by an efficient
allocation of scarce resources, which is
determined by the economic structure.
Figure 2 clarifies the linkage among
capabilities, product markets, institutions,
costs, productivity and competitiveness.
Benchmarking
Benchmarking goes beyond competitive
analysis by providing an understanding of
the processes that create superior
performance. In the past, benchmarking was
adopted only among organizations. Today,
whole industries and even nations have
embraced benchmarking as a tool for self-
improvement and sustained competitiveness.
As a continuous process, benchmarking
first determines the key areas to be
benchmarked and then sets out to
identify best practices world-wide.
Information must be gathered in order to
understand current practices and those of
benchmarking partners ± the presence of a
performance gap or to capitalize on the
strengths. In an environment of constant
change, best practices must be continuously
monitored and recalibrated where needed.
The benchmarking process can be
summarized by a generic five-stage model, as
shown in Figure 3.
The objective of benchmarking is to
improve the competitive position of nations,
industries and organizations through:
. knowledge of self;
. knowledge of others;
. incorporating the best in gaining
superiority.
Benchmarking can be conducted at three
levels:
1 enterprise;
2 industry/sector;
3 economy.
Despite the different levels of benchmarking,
the same generic five-stage model applies.
Industry benchmarking closely parallels
enterprise benchmarking. Here, the
emphasis is on uncovering the best-practice
business functions or processes which lead to
market shares, high profitability and high
levels of consumer satisfaction.
Benchmarking at the economy liveliness has
more to do with the attractiveness of a
national economy as a place to do business.
Notwithstanding this, the objective of
benchmarking remains the same at all three
levels, that is to maintain and enhance the
competitiveness of nations and enterprises.
Benchmarking for competitiveness
In an age of increasing globalisation
competitiveness is a real and pressing
concern among policy-makers in many parts
of the world.
To ensure sustained competitiveness, the
diversity and inter-relationship among the
factors influencing the competitiveness of
enterprises must be well understood and
properly managed. But merely doing so will
not guarantee sustained competitiveness, as
other countries may be making even greater
strides in the competitiveness race. Hence, it
is imperative that continuous, systematic
benchmarking should be undertaken to
assess the international competitiveness of
nations, industries and enterprises; identify
best practices world-wide; and learn from
them. A committed and ongoing
benchmarking initiative reflects a
willingness to learn and improve, and is one
that bodes well for the competitiveness of
nations, their industries and enterprises.
The prosperity of a nation is measured as
the gross domestic consumption per capita.
This statistic indicates the quantity of
products and services that are consumed per
P. Shurchuluu
National productivity and
competitive strategies for the
new millennium
Integrated Manufacturing
Systems
13/6 [2002] 408±414
Figure 3
The benchmarking process
Figure 2
A competitiveness framework
person. Since it is impossible to consume
more per person, productivity is what is
going to determine our economic, social and
political success.
Productivity is not something detached
from reality: it happens in individual
organizations where people work. A wide
spectrum of people is involved: from top
management through to the most humble
task to be fulfilled in the organization. The
important requirement is, however, that
everybody must work together with a
common vision to achieve more wealth for
all. In other words, it is necessary that every
person should have a value system that
compels him or her to be more productive.
The interesting thing about a productive
value system is that it is within the reach of
every employee to realize these values.
Productive behavior is demonstrated by
three factors:
1 Everyone in the organization must be
committed to delivering the right product
or service to the recipient of his/her
output on time, every time;
2 Everyone must be committed to eliminate
waste of resources such as time, materials
and space; of the organization as a whole
and not only of the own or department;
and
3 Everyone must behave in a manner that
will generate trust ± upwards, downwards
and sideways.
These values are essential to ensure
productive behaviour at the workplace, but
to ensure that all employees actually perform
according to these values is not easy. One
must believe in the adage: measurement
drives behaviour. People will deliver those
outputs required of them as long as the
outputs are known, measured and controlled.
It is imperative that everybody adopts,
develops and introduces measures of the
[ 411 ]
P. Shurchuluu extent to which the right product or service
National productivity and is delivered on time, the waste levels of
competitive strategies for the meaningful resources and the degree of trust
new millennium
in the organization. This is important,
Integrated Manufacturing
Systems because, if we do not do this, the golden
13/6 [2002] 408±414 opportunity to change Mongolia for the
better may pass us by. Threats are indeed
only opportunity in working clothes. We
cannot wish or complain ourselves to a
higher economic plateau: we might only
work ourselves up to that plateau.
History has taught us that success in a
corporation's performance is significantly
affected by the culture of the organization.
An optimal culture is one that best supports
the mission and strategy of the company of
which it is a part. In the context of US
corporations, one could easily subscribe to
their argument. However, in our global
economy, many organizations with world-
wide operations are a mix of Americans,
Europeans, Asians, etc. working together,
each with their own orientation to life and
work. Given the fact that 25 per cent to 50 per
Figure 4
Dynamic productivity and competitiveness linkages
[ 412 ]
cent of an employee's behaviour on the job
is culturally determined, one needs to
understand the cultural values behind this
employee. This is especially so, as the nature
of business and competition evolves from a
local and national focus. With it, we must
expand our understanding of the nature of
work from that of a single cultural to a multi-
cultural perspective. For management, the
critical challenge is to help their employees
become more competitive on the job and to
relate better to the global problems and
opportunities of the company.
Dynamic linkages between
productivity and competitiveness
The various facets of productivity and
competitiveness can now be integrated into a
comprehensive framework showing their
dynamic linkages (see p. 409). This
framework is depicted in Figure 4. When
assets and processes are effectively managed
and transformed, higher productivity is
achieved. This lowers ULC (unit labour cost)
and produces products that meet or even
exceed customer requirements. The
consequence is greater competitiveness, as
companies gain an edge over others and
enlarge their market shares. Recent evidence
in the USA strongly supports the point that
competitiveness depends on both lower
prices and meeting customer requirements.
Premium-priced brands like Kellogg, Heinz,
and Kraft, which thrived by focusing mainly
on product differentiation, are now under
siege by the low-priced supermarkets' own
brands, which are equal in quality to the
high-priced branded products.
However, the cause-and-effect relationship
is not unidirectional, running from
productivity to competitiveness. Instead of a
static relationship, there is in fact a dynamic
feedback loop, as greater competitiveness
leads to an enlarged economic pie for
distribution. At the national level, this takes
the form of a high GDP per capita, made
possible by a high productivity-fuelled GDP
growth.
Besides enabling a higher and better
standard of living for the populace, the
greater amount of wealth generated in the
economy increases companies' profits. This
makes possible more investments in assets
with better processes, as well as investment
in productivity measures to obtain maximum
results from them. The cumulative effects
lead to even higher productivity growth,
which fuels the process that results in
greater competitiveness.
P. Shurchuluu
National productivity and
competitive strategies for the
new millennium
Integrated Manufacturing
Systems
13/6 [2002] 408±414
Figure 5
National best practice programme
What has to be done?
To help organizations, in both the public and
the private sectors, master the best practices
and attain world-class business excellence,
the National Productivity and Development
Center, Mongolia (NPDC) has initiated the
national best practice programme (see
Figure 5). This national initiative provides a
comprehensive framework, based on the
Mongolia National Productivity Award
(NPA) criteria, to systematically assist
organizations and operational performance
to reach world-class status.
The NPA framework is based on proven
models of business excellence such as the
Malcolm Baldrige National Quality Award in
the USA, the European Quality Award in
Europe, the Deming prize in Japan and NQA
in Australia. It focuses clearly on the
continuous improvement and development of
an organization in all aspects of business
excellence. The NPA criteria are broad in
scope and non-prescriptive enough to allow
interpretation that best fits the improvement
needs of the organization. It includes such
areas as customer focus, leadership, use of
information and strategic planning.
Under the national best practice
programme, NPDC will assess companies'
performance in relation to the NPA
framework; make available to them best
practice information and benchmarks; assist
them with improvement programmes; and
recognize them for adopting the best
practices. Through benchmarking and
continuous improvements, members of the
Mongolian quality class companies will
eventually progress to become world-class
organizations. They will then be invited to
apply for the more prestigious quality award,
which is to be given as recognition for the
achievement of world-class standards of
business excellence.
Conclusion
Under acceleration of globalization
productivity and competitive strategies in
the twenty-first century mainly cover
sustainable actions for making all resources
and processes competitive. Productivity
enhancement will lead to greater
competitiveness by providing and utilizing
dynamic linkages between the two.
Institutions have to act to alter capabilities
and product/service markets, modify
behavior by changing attitudes and
expectations, and determine the rules of the
game, so that the institutional framework
provides the necessary climate for high
productivity and competitiveness.
For the nation, its industries and
enterprises, benchmarking for
competitiveness is vital. The very way
to master the best practices and attain
world-class business excellence by
[ 413 ]
P. Shurchuluu
National productivity and
competitive strategies for the
new millennium
Integrated Manufacturing
Systems
13/6 [2002] 408±414
[ 414 ]
enterprises is to implement the national best
practice programme being initiated by the
NPDC.
Further reading
Boltho, A. (1996), ``The assessment: international
competitiveness'', Oxford Review of Economic
Policy, Vol. 12 No. 3.
Bossok, J. and Nagashima, S. (1997), Corporate
Strategies for a Borderless World: Sharpening
Your Competitive Edge, APO, Tokyo.
Business Week (1993), ``The technology payoff'',
14 June.
Negandhi, A. and Wilpert, B. (Eds) (1978), Work
Organization Research: European and
American Perspectives, Kent State University
Press, Kent, OH.
Porter, M.E. (1990), The Competitive Advantages of
Nation, Macmillan Press, London.
Radrik, D. (1997), Has Globalization Gone Too
Far?, Institute for International Economics,
Washington, DC.
Senge, P. (1992), The Fifth Discipline, Random
House, New York, NY.
Shurchuluu, P. (1998), ``Socio-cultural and
economic background for nation-wide
productivity drive in Mongolia'' in
Hwang, K.K. (Ed.), Easternization: Socio-
cultural Impact on Productivity, APO, Tokyo.
Shurchuluu, P. (1999a), ``Future challenges and
NPDC policies and strategies'' in Changing
Productivity Movement in Asia and the Pacific:
Challenges and Lessons, APO, Tokyo.
Shurchuluu, P. (1999b), Country Paper, APO Basic
Research Meeting on Cross-cultural
Management and Productivity.
Shurchuluu, P. (2000), ``How to be competitive and
productive'', Century's News, No. 50, 2 March.